Timber processing companies in Indonesia could benefit from government proposals to set up an independent financing institution.

The funds would be used to revamp aging machinery to make companies more efficient and provide equipment suited to the increasingly smaller logs now produced.

A recent forestry ministry assessment of the country’s timber industry revealed that only 14 out of 140 registered companies show fairly good financial and environmental performance.

But most of the best performing companies have only a 50% efficiency rate – leaving half the raw material they process as waste.

In countries with state of the art machinery, waste is almost zero – but upgrading Indonesia’s machinery would cost millions of dollars and banks are reluctant to give loans because of the industry’s poor environmental image.

The World Bank has been asked if it will provide loans and other money could come from the ministry’s forest rehabilitation funds.

The industry is also being encouraged to restructure its businesses, invite investors and seek alternative materials to timber, such as bamboo.